Prof. Raj Kishore Panda in Bhubaneswar, February 23, 2024: The farmer-unions are in the street for more than a week. These unions are agitating at Delhi border demanding legalization of Minimum Support Prices (MSP) for the crops under procurement but continuing as an administered price by the Central Government over the years. In addition these farmer unions are also urging upon the implementation of Swaminathan Commission Report, 2006, pension for cultivators and farm labourers, loan waiver and many more. The present agitation is a continuation of the earlier one organized in 2021 and later was called off with the government repealing the three contentious farm laws then created huge commotion nation-wide.

On the farmers’ demand for guaranteed MSP opinions differ among the experts. The agricultural policy expert Devinder Sharma argues that the agricultural price policy followed by the central government is in the interest of the consumers but at the cost of the farmers. This view also finds support from among many economists. These economists are of the view that in developing countries the government policy is largely discriminatory against farm sector as the crop prices regulated by the state are kept low.

The social policy in these countries takes an upper hand over the farm policy. The development policy pursued in India is very much akin to this contention. In case of India the central government under National Food Security Act is obliged to provide food security to its citizens and accordingly pursues the policy of keeping prices of food grains low and affordable to the average consumers. The Prime Minister’s recent announcement to provide free ration to 81.35 crore beneficiaries (more than 50% of the total population of the country) for a period of 5 years with an estimated cost of Rs.11.80 lakh crore is a testimony to the above contention of the economists.

No doubt, contrary to the argument supporting the farmers’ cause, Prof. Ashok Gulati, the noted agro-economist-scientist bears a completely different view. He cautions against guaranteeing MSP and considers it to be anti-farmer in effect. He argues that in a situation of excess supply (bumper harvest) over demand for a particular commodity, the stock will remain unsold because of legal constraints. In such a situation a farmer incurs loss.

Besides, a guarantee MSP, according to him will create other complexities in the system. It will lead to over-burdening the government in monetary terms, over-use of natural resources affecting climate, agro-ecological balance etc. But contrary to his argument, let us consider a drought year/ or a year of crop failure. What will happen when the supply of a crop in this situation falls short of demand?

Going back to the history of MSP we find that in the late 1960s when India was under deep food-deficit situation the MSP was introduced as an incentive to help farmers expand production of food grains. Today the situation has changed. Because of Green Revolution, India is now a food surplus country. Not only famines and people dying out of hunger have been eliminated but also the country has been able to export some cereals to outside. As such the present situation suggests that the farmers should divert from cultivating food grains to other cash crops and horticultural crops.

In this context both the central and state governments should prepare a plan of action jointly, identify crops suitable to local agro-climatic conditions and provide necessary incentive and support to farmers for crop diversification. India produces a sizeable quantity of pulses yet the country imports quite a large quantity of pulses to meet the consumption requirement. The farmers need to be educated to divert more acreage to pulses cultivation.

Besides, as per available data prices of agricultural commodities are found increasingly volatile in recent years, particularly after liberalization. This has created added shocks to the farmers over and above the production shocks. Unlike manufacturing commodities where future prices can be anticipated in advance and precautionary measures can be provided, the price variation of agricultural commodities cannot be forethought. More so, in India with the predominance of small holders who are supposedly affected by the government’s procurement process indulge in distress sale of their produce thereby are deprived of getting fair return of their produce.

In the end the question is why do the farmers demand legal status of MSP and not interested in fair and remunerative prices for their produce? Does present MSP lack conceptual clarity? Do the farmers not aware of the consequences of a legal MSP? To answer all these questions we may say that MSP all along is working on a provisional basis without concurrence of the parliament.

This puts the farmers under great uncertainty. They do not know what will be the fate of MSP year ahead? More so, the procedure followed by the government in determining MSP is often questioned. Besides, crop procurement data over the years indicate that wheat and rice are overwhelmingly purchased than pulses, oilseeds and other crops. Let all these uncertainties be addressed. A composite approach is needed to solve the problem.

In the present situation it is important to bridge the trust deficit between the farmers and the government. The farmers need to be convinced that MSP cannot be sustainable. Particularly considering agro-economic conditions, market volatility and shift in consumers preferences the cultivation of food grains will not be remunerative and government may not be able to support an increasingly unsustainable system.